Published in on Friday, April 17 2009 by Ideal Debt Solutions
Not surprisingly, there has been an upsurge in interest in mortgage payment protection insurance – MPPI for short. But is it really worth it?
Well there are certainly problems with MPPI as people are very often unaware of its limitations and the fact that it usually only offers protection for a year’s worth of mortgage payments (and other related expenditure like buildings insurance) should you fall ill or be made redundant for example.
And a lot of payment protection insurance has been mis-sold in the past giving the products available something of a bad name – as explained here. You may be able to claim back a large amount of money if you’ve been mis-sold payment protection insurance (PPI) with a loan, credit or store card any time during the last six years.
But this doesn’t make MPPI a bad thing. It’s a matter of checking the terms and conditions of the MPPI on offer as the policies vary quite considerably in terms of what they cover and for how long, so it really is essential to do your homework.
The government has introduced some schemes aimed at helping struggling households as the recession has begun to bite. Whether you are eligible for this help depends on your personal circumstances such as the size of your mortgage and your level of savings and how near you are to having your home repossessed. There’s further advice here.
But even this still doesn’t offer the same level of protection as a good MPPI policy which may be worth considering depending on your personal circumstances. Remember that most policies only cover you for a year, so if you’re likely to get a large redundancy payment, MPPI may not be absolutely necessary - though accident and sickness cover could still be advisable.
By the same token, if accident or sickness prevented you from working, would your employer continue to pay your salary – or a large chunk of it – for a year or more? If you do have good sick pay terms, the accident and sickness element of MPPI is probably unnecessary, so consider taking out a policy to cover unemployment only as these are cheaper. Also, permanent health insurance usually pays out a proportion of your salary if illness prevents you from working, so if you have this it may be wiser to take out unemployment insurance only.
If you’re self-employed, the policy will only cover a stoppage in trading due to factors beyond your control, so carefully check your potential policy to see how and if you would be covered for different eventualities.
Unfortunately, if you are already in arrears with your mortgage, it’s unlikely that you’ll be able to insure yourself and similarly, if there was already a realistic “foreseeability of redundancy” when you took out the policy, it may be deemed invalid
If you’re in any doubt as to the best course of action to take, seek expert personal debt advice on all forms of debt, mortgage issues and potential solutions.